BAKU, Azerbaijan, May 23. The issuance landscape for green bonds in emerging markets displayed notable trends in 2023, Trend reports with reference to the latest International Finance Corporation (IFC)-Amundi Green Bond report.
The share of green bonds issued in local currencies remained relatively stable, rising slightly to 9 percent of the primary market from 7 percent in 2022. This stability reflects a cautious yet steady confidence in local currency markets among emerging economies.
However, the report highlights a significant shift towards hard currency-denominated green bonds, which increased to 37 percent in 2023, up from 31 percent the previous year. This trend underscores a growing preference among issuers and investors for the perceived stability and lower risk associated with hard currencies amidst global economic uncertainties.
In a contrasting development, the proportion of green bonds denominated in Chinese yuan declined sharply to 54 percent of the total issuance, down from 62 percent in 2022. This decline is in line with the weakening trend observed in China's primary bond markets, as detailed earlier in the IFC-Amundi report. The stability of Chinese local bond yields did not attract as much investor interest, particularly when compared to the rising yields of U.S. Treasuries, which offer higher returns and greater appeal for investors seeking income and capital growth.
The report further notes that the U.S. dollar's share of green bond issuance surged to 30 percent in 2023, up from 18 percent the previous year. This significant increase highlights the U.S. dollar's dominant position in the global financial markets, providing a preferred alternative for many issuers. Similarly, the euro's share climbed three percentage points to reach 7 percent.
Among other emerging market currencies, the Brazilian real and the Indian rupee were notable, accounting for 3 percent and 2 percent of the issuance, respectively. This diversification into various local currencies illustrates the broadening base of the green bond market in emerging economies, as issuers seek to tap into different pools of capital and investors explore a variety of currency exposures.
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